John D. Correnti

John D. Correnti

JOHN D. CORRENTI is Vice Chairman, President and Chief Executive Officer
of Nucor Corporation. He joined Nucor in 1980 as Manager of
Construction, became General Manager of its in Vulcraft Division in
Brigham City, Utah in 1982, Vice President of Nucor Steel in Plymouth,
Utah in 1984 and Vice President, General Manager of Nucor-Yamato Steel
Company in Blytheville, Arkansas in 1987, President and Chief Operating
Officer in 1991, and became Vice Chairman, Chief Executive Officer of
Nucor Corporation headquartered in Charlotte, North Carolina in 1996... More

TWST: Could you start us with a brief summary description of Nucor? Mr. Correnti: Nucor today is the second largest steel producer in the
United States. Last year we shipped nine and a half million tons, and
this year we'll ship in excess of 10 million tons. We're also the most
diversified steel manufacturer from reinforcing bar on the very low end
of the spectrum to motor lamination steel on the high end of the
spectrum, and everything else in between. We're in the metals and the
metals related area. We have eight steel mills. Four of them produce bar
products, angles, channels, rounds, SBQ bar. We have one large
structural steel mill that produces wide flange beams. It's a joint
venture called Nucor-Yamato. We have three flat roll mills at
Crawfordsville, Ind; at Hickman, Ark; and at Berkeley South Carolina
that produce flat roll steel, hot band coils, cold rolls, galvanized,
409 stainless steel, pickled and oil, etc. And now we're currently
starting construction of our ninth steel mill in Hertford County, North
Carolina, which will produce plate steel, three-eighths of an inch to
two inches thick, up to 120 inches wide. In addition, we have three cold
finish plants for cold finish bars. We have six joist plants for steel
joists, five deck plants, two pre-engineered building plants, a grinding
ball plant, and a non-precision bearing plant. In total we have about
7000 employees, and total revenues of about $4.5 billion.

Key Trends

TWST: What are the key trends or issues in your industry today? What are
you facing and how are you addressing those issues and trends? Mr. Correnti: Currently, the biggest trend is imported steel. Normally,
the U.S., in a good economy consumes about 120 million tons a year of
steel. And if everyone in the country who currently produces steel runs
at capacity, it's about 100 million tons of capacity. So we have about a
20 million ton shortfall. Unfortunately today, at the rate that
imported steel is being dumped and I repeat that dumped into this
country. It's coming in at a rate of about 45 million tons per year.
And it's coming in from Japan and Korea, and from Russia and the
Ukraine. And basically because of the meltdown over in the far east, and
the financial situation over in Russia, it's being brought into here at
prices, not only far below what they're selling that same steel in their
home market, but far, far below what the cost of those countries is in
producing that steel. We've dropped prices close to 30% on flat roll
steel in the past four and a half months. TWST: Has there been no response to this market? Mr. Correnti: No, there hasn't been. The commerce department and the
international trade commission are reviewing it right now. But it's
really causing difficulty, not only for Nucor, but all steel
manufacturers in general. Nucor has long been noted as one of the most
efficient lowest cost producers in the world. When steel can be brought
into this country with $40 to $50 of freight on top of it, and sold at
prices $50 to $100 a ton below our price, there's concern by everybody. TWST: How do you adjust short-term and long-term to that occurrence? Mr. Correnti: Short-term, you try to be the lowest cost producer and to
maintain your margin. Obviously you're going to have much less margins.
We're not going to sell anything below our cost, but it sure does affect
earnings in the short term. In the long term you can't let financial
situations in other countries really affect you because it would be a
knee-jerk reaction. So in the long-term, what we strive for is we try
to continue to build steel mills as economically and as quickly as
possible, and then get them up and running with high productivity, and
be the low-cost, high quality producer of steel in the world. TWST: What are the current capacities and utilizations that you have?
How do you anticipate that your construction will change those
capacities and utilization figures over the next three to five years? Mr. Correnti: Our capacity, as I say, right now is about 11 million
tons. After we're done constructing the new plate mill our capacity will
be closer to 12 million tons. And that plate mill will take about 18
months to build. So we're looking to the year 2000 before that is up and
running. Normally we try to run our plants at 100% capacity, and we do
that by adjusting our prices so that we can do that. As I can say right
now we're pretty low on our prices. We're still making money, but we're
running on the skinny. TWST: Are you a build-on-demand system at this point? Mr. Correnti: Yes, demand is still very good. The economic scenario in
the United States is still very strong. The construction market is good.
Consumer confidence is still high, so the people are buying automobiles.
They're buying washers, dryers, refrigerators. They're building new
houses, moving into new apartments. So from the demand part of the
equation, with one exception that I'll mention to you, the demand for
steel is still pretty good. The exception is that oil and gas have
slowed down a little bit, and that's mainly because the price of oil is
down. So the exploration and the rig count has gone from the high 900s
down to the low 800s, which means that less drill pipe is consumed, and
from a demand standpoint, that hasn't bode very well for the steel
industry. But other than that, all other segments of the industry are
still very, very good. Construction is 55% of the steel demand, and that
is high-rises, bridges, the Highway Bill, the Transportation Act, locks
and damns. Everybody seems to be building a new stadium around the
country for their sports teams. So that's going to bode very well for
the steel industry. TWST: Information technology and management's information systems are so
critical today. What is the state-of the-art at Nucor? Where do you
stand out? What areas are you focusing on to improve? Mr. Correnti: We don't stand out at all from anybody. A lot of people
think, oh, I have to have the latest bell and whistle in order to be
efficient and I think a lot of it is the proponents of these people who
are selling software, and systems, and I don't even have a computer
screen behind my desk. I still want to talk to people on a face to face
basis, or over the telephone, and I don't want to communicate with them
via e-mail, or via the computer, and we want to keep the personal touch
with our customers and with our suppliers. Unfortunately, I think,
America is moving away from that because of the advent of the computer
and e-mail, and voice mail, and everything else. TWST: Other than facing the threat from the imports, what are the other
constraints or limitations that you're addressing and how are you
addressing them over the next two to three years? Mr. Correnti: It's in growing the market, and the steel industry grows
very slowly, but there are certain markets which we haven't untapped,
and I can name a couple of them. For instance residential construction,
most of residential construction is still done with lumber and with
wood, whereas commercial construction today is all done with steel or
with concrete. So our competition in the flat roll arena is aluminum,
plastics and composites in a car. In the construction area it's wood and
concrete. So our goal is drive down the cost of producing a ton of
steel, and make it thinner, make it stronger, and make it the material
of choice, both from a quality standpoint, and a cost standpoint.
Getting back to the residential construction, the average 3000, 4000
square foot house would take about six and a half tons of steel, if it
were all built entirely out of steel. And at 1.4 million housing starts,
that's a potential, a potential 9 million ton market, which is virtually
untouched. The other thing is, from a quality standpoint, if you were to
go to a lumber yard today and buy 20 2x4s, wood 2x4s, I'm sure you would
be lucky to get five or six that are straight. The rest are curved and
warped, and have knots in it, and that's because most of the lumber
today is not harvested from old growth lumber. It's all new growth
lumber, and the quality is down. The other thing is, from an
environmental standpoint, that 4000 square foot house I referred to
earlier, if you want to build that, go cut 55 trees down. My alternative
is about six junk automobile bodies, which are recycled scrap, which are
recycled into new steel. So from an environmental standpoint, you can
hit the market that way. The same thing, with steel you don't have to
worry about termites. When the hurricane Andrew went through Florida,
the only thing standing down in Homestead, Florida were three steel
framed houses. So from a safety standpoint, maybe you've seen some of
these Steel Alliance adds. All the major steel companies in America
joined together to inform the consumer. Not to inform General Motors or
Chrysler, or Fridgedaire or Maytag, or anything else, but to inform the
American consumer. When we get our story out as a steel industry,
American consumers are very, very savvy, and very, very smart. When you
tell them the story, they'll make the right choice. I'll throw my hands,
and I'll throw our company in their hands, and they'll buy more and more
steel. So that's what we're trying to do. We're trying to get the mother
when she goes into the car dealership, the second question she asks
after what's the price is are these doors on this automobile steel
reinforced? Here again, that bodes to the safety consideration. You
know, I want safety for my children. So I think steel has got a bright,
bright, bright future.

Mergers/Acquisitions

TWST: In discussing growth, it's always new plants, new manufacturing
facilities, or new processing facilities. Is there room for acquisitions
or mergers with Nucor? Mr. Correnti: No, and I said that pretty fast. We like to do greenfield
for two reasons. Number one is when you do it new, you're putting in
1998 or 1999 technology. You're not buying somebody's old technology,
whether it's from the 1950s, the 1960s, or the 1970s. The other thing,
which is more important than the technology is the Nucor culture, and
that is the management and the employees that you put behind that
technology that enables you to come across that finish line first,
second or third. The analogy I use is anybody with money can buy the
same technology, the same equipment that Nucor has. It's not
proprietary. It's not patentable, but it's like you or I, or your
readers buying if you are a car fan, if you bought Dale Ernhart, or
Jeff Gordon, or Mark Martins race car, it's the same technology they
use, but what really counts is who you have behind the wheel of that
car, and who's driving that car. And that's what it takes in the steel
industry. It's the employees and the management that you put behind that
new technology that enables you to cross the finish line first, second
or last. And obviously in our case that's how much profit you make, and
how you treat your customers, and how you run your business. TWST: Viewing Nucor as a value-added situation to steel production, what
about leveraging that brand into NAFTA or into other emerging markets? Mr. Correnti: The question is can you transfer that culture into another
market. I'll tell you, with some of the emerging markets I'll do the
arithmetic for you very quickly. A third world country is not interested
sometimes in building a steel mill, spending $300 or $400 million for a
1 million ton steel facility that employs 300 people. They want a steel
facility that employs 3000 people. Well, I'm sorry, you're just not
going to do it with 3000 people. There are other places in the world.
Let's take some places in Europe. They shut down for July and August.
The Germans I don't think want to work 30 hours a week now, or 34 hours
a week. So you have to pick your spot. I think that certainly there are
places in the world where the Nucor culture can be transferred, and can
be transferred selectively. But it would have to be done very, very,
very carefully. Maybe it's cheaper, and maybe it's better, and maybe
it's more productive to build a steel mill in the United States, where
normally utility costs are cheaper, where the raw material scrap is
readily available, and then to export the steel to these other
countries. TWST: You mentioned the infrastructure within this country is a prime
market for steel over the next 20 years. What is the status of the
infrastructure in North Carolina that you are relying on for energy for
transportation for personnel? Do you feel that is a strong market in
those respects or are there needs in that area? Mr. Correnti: I think that just the Transportation Act. Your readers
have probably read the same stories that I have, that 15% to 20% of the
highway bridges in this country are substandard, and maybe another 50%
have to be worked on within the next 20 years, as loads become greater
across the highways, etc. The same thing with the infrastructure. If you
move from the East Coast, right across the country to the West Coast, it
gets a little bit better as you go West because it's all newer. But you
just think of the subway systems, the rapid transit systems, the utility
systems, whether it be water or sewer, and some of these were built in
the early 1900s, in the 1920s, and the 1930s. And those kind of things
don't last forever. They have to be replaced or be repaired. So I think
as far as public transportation, and public utilities, whether it be the
water system for New York City, or the sewer system in Cleveland Ohio,
or in Chicago, those systems now are becoming 50 years old, or 60 years
old, and they need to be repaired and be replaced. Of course that's
going to bode very, very well for the steel industry. TWST: What advantages are you finding structurally by having your
centers mostly in North Carolina? Mr. Correnti: Our headquarters are in North Carolina. Our steel mills
are nowhere near North Carolina. Our steel mills are in Utah, Nebraska,
Texas, Indiana, South Carolina and Arkansas. So we serve the whole
country. So there's no one segment of the country that has a larger
demand than another segment of the country. So we've got the whole
United States covered. The new plate mill is going to go on the North
Carolina, Virginia border. That's the plate facility though. But that's
a specific product that goes into rail car building, ship building,
barges, oil drilling rigs, etc., things like that.

Management

TWST: Looking at your top management team, what are the skill sets and
strengths that you have there today? Give us a frank assessment. What
needs are you looking at? Are there changes or additions over the next
two to three years? Mr. Correnti: Not many. I like to brag on one thing. Nucor is a $4.5
billion company, and we still have total corporate headquarters that has
23 people in it, and we're in about 18,000 square feet of rented office
space in Industrial Park in the southern part of Charlotte, North
Carolina. So this company does not waste a lot of money on corporate
overhead, or frills, or anything else like that. The kind of people
we're looking for are common sense managers who have very good
communication skills. And that's what it takes. You have to have
leaders who can communicate with your employees, and with your customer,
and you can communicate face to face, and don't have to communicate
through a bunch of attorneys, and with a bunch of legalese, whether it
be with a customer or with a supplier, and who can still do business on
a handshake, and their word is their bond. And that's the type of
individuals that we're looking for. We're looking for decision makers,
people who are not afraid to make decisions. And we encourage that in
our company. I wish more people in corporate America would do that. I
think there is so much unproductive work that is done. Let's call it
cover your behind type stuff, and that is memos, and meetings, and
memoranda, which all it does is cover your behind in case the decision
was wrong. The analogy I like to give is Babe Ruth used to be the Home
Run King, but he was also the Strikeout King. And that's the kind of
employees we look for at Nucor. We want guys who want to get up to the
decision making plate and swing for the fences. And Gosh Darnit, they're
going to hit a lot of home runs. When they hit those home runs, it's
going to make a lot of money for Nucor Corporation. But also, the price
you pay for the home runs is you're going to get a few strikeouts, and
those strikeouts are going to cost money for the Nucor Corporation. The
people that don't work out with us are the ones that are afraid to get
up to the plate, or only want to get up once or twice in the game. We
want people who want to get up there 10 times, or seven times, if
possible, during the playing of the game, and are willing to make those
decisions which will ultimately make money for Nucor Corporation. The
other thing is that you have to have management whose ideals, whose
needs, are in sync with the hourly employees who are really the ones
that are making the money for the corporation. And those are the young
men and young women who are making the steel, and rolling the steel, and
shipping the steel, and selling the steel. They're the ones that really
do the job. And if you can align their needs and their wants with the
management's needs and wants you don't need a union. You don't need a
bunch of rules and regulations, and a bunch of policy manuals, and you
don't need time clocks, and you don't need vision statements, or mission
statements, or anything else. You just need to communicate on a
commonsensical type basis, and everybody succeeds. The results in Nucor
have spoken for themselves. Yes, we're a $4.5 billion company, but I can
tell you, we act, smell, look and feel like we're a $200 million revenue
a year company. TWST: If you could look over the shoulder of an investor as they review
financial reports and look at your statements and other announcements,
what would you suggest they focus on? What would you be looking at as
far as key items or key sets of information to gain insight into where
you're going and what you're doing? Mr. Correnti: Number one is to look at the track record. Now, that's
looking in the rear view mirror. I understand that, but look at the
track record. Number two is look at the management of the company.
Number three is you've got to be able to read a balance sheet. Look at
the balance sheet. There is virtually no debt. The only debt we have is
industrial revenue bonds, which are at very low interest rate. And why
that's important is that we're still a growth company, but we're still
in a cyclical industry. When you get to the trough of the cycle, those
that are encumbered with a lot of debt don't get forgiveness. So from a
cost standpoint, because of that debt, their cost to produce that ton of
steel is much higher than a company that has virtually no debt. Also,
when you look at that past history in Nucor, the company is not going to
grow 25, 30% per year, both top and bottom line because we're a much
larger company, and the percentage is much, more difficult. But we
certainly feel comfortable with 15% growth. That's both top line and
bottom line, averaging out over a five year to ten year period. And
granted, some years it might be a little bit slower, but when you bring
a new steel plate mill on in the year 2000, it will be a little bit
higher. So that's what you have to look at. How secure is my investment
in a company like Nucor? And it's tough today. A lot of investors, I
think the sellside analysts understand Nucor very well. Unfortunately
some of the buyside people, there are some who understand it well, but
steel is looked at like an old rust belt, antiquated, no growth, slow
growth industry, whatever buzz word you want to put on it, And if it's
not in computers or something, I kid people. I say if our stock price
doesn't get a little bit higher, we're going to change our name to
Nucor.com., and we're going to be in the steel chip business. TWST: What insight would you draw most attention to for steel analysts
at this point? Where is the underperception? Where is, if at all, the
misperception? Mr. Correnti: I think the misperception is that people think we're not
going to grow anymore. And also the misconception is that we're so large
now, being the second largest steel producer, that we're subjected to
some of the problems of some of our other larger competitors who have a
lot of legacy cost, who have a lot of burdensome union contracts, and a
lot of fixed cost. Whereas with Nucor, yes, we may still have large
fixed costs, but we have much, much more of variable cost, so that we
can react to market circumstances. We talked about earlier that we can
lower the price of steel, $50, $60 a ton and still make a buck, whereas
our competitors can't even come close to that. And the other things is
that times have been awfully good in the steel industry in the last five
to eight years, and the comparison between Nucor and the rest of our
competitors certainly doesn't stand out as much as it does in the slow
times and in the trough of the cycle. Whereas the day that we produce
small black numbers, all our competition will produce large red numbers.
But I think one misperception is that we're an old, lethargic, large
steel company. We are a big steel company, but as I said, the thing that
I want to stress is the comment I made before. We are still nimble, and
we're still lean, lean, lean, and we still act, smell and feel as we're
a $200 million company, and we fight everyday for every customer, and we
fight everyday to continue to lower our costs, to increase our quality.
At the end of the day the strongest is going to survive. And that gets
back to our balance sheet, and it's stronger than anyone's in the
country, as far as the steel industry is concerned. But if you're asking
me how do you get somebody to buy Nucor stock rather than Yahoo, or
Amazon.com, I can't answer the question. All I can tell you is I don't
think we're the flavor of the month, or the flavor of the week, but that
will change. That will change. TWST: Give us your summary statement. What is the essential message that
you would convey to individual and institutional investors? Over the
next two to three to five year time frame, what are the strengths and
advantages that distinguish and recommend Nucor as an investment today? Mr. Correnti: My recommendation is at the end of the day, when you look
at the numbers, and if you're going to invest in a stock, and you want
your investment safe, and you want it with a company that is going to
protect your investment and grow, and not lose it, Nucor is the stock to
invest in. TWST: Thank you.JOHN D. CORRENTI
Vice Chairman, President & CEO
Nucor Corporation
2100 Rexford Road
Charlotte, NC 28211
(704) 366-7000
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